Rupee ends lower despite rise in most Asian peers; Powell's remarks in focus

The Indian rupee closed weaker on Thursday as importer and interbank dollar bids outweighed cues from a rise in most Asian currencies, ahead of closely watched remarks from Federal Reserve Chair Jerome Powell.

The rupee closed at 83.6425 against the U.S. dollar, down from its close at 83.5925 in the previous session.

Importers' dollar-buying, related to month-end payments, along with the unwinding of some interbank long positions kept the rupee on the backfoot despite gains in its Asian peers, traders said.

The dollar index was little changed at 100.9. Most Asian currencies rose, with the offshore Chinese yuan up 0.3% at 7.

The rupee has traded with a positive bias since the US Federal Reserve kicked off policy easing with a larger-than-usual 50 basis points cut last week, but has struggled to rise above a key resistance level at 83.50 despite strong portfolio inflows.

Overseas investors have net bought about $10 billion in local stocks and debt so far in September, the strongest monthly inflow in 2024.

Dollar buying interest from importers, speculative positioning and also likely "passive absorption," of dollar inflows by the Reserve Bank of India have limited the currency's gains, a trader at a state-run bank said.

Meanwhile, dollar-rupee forward premiums rose on Thursday with the 1-year implied touching an over 16-month peak of 2.41%, buoyed by wagers that the Fed will deliver another 50 bps rate cut in November.

"Ultimately, stronger US data is needed to convince markets to abandon 50 bps cut bets ... there is still a substantial risk the dollar will stay capped into the US election," ING Bank said in a note.

Fed Chair Powell is scheduled to speak later in the day in New York, while other policymakers will also deliver remarks that may cues on the future path of US policy rates.